Economists agree that:
A. sometimes incentives facing a decision -maker will not achieve the desired result.
B. incentives are likely to be inconsequential unless prices are involved.
C. social and moral pressures cannot be modeled.
D. markets are always the most efficient means of solving society’s problems.
Answer:
Generally, as the size of a firm increases:
A. team spirit increases.
B. marginal productivity rises.
C. economies of scope fall.
D. monitoring costs increase.
Answer:
Which of the following is a problem associated with judging competitiveness by
structure?
A. It requires that each action of a firm be analyzed on a case-by-case basis, which is
very time- consuming and expensive.
B. Whether the actions of a firm can be considered appropriate competitive behavior
depends on the circumstances.
C. Structure can be a predictor of future performance.
D. It is difficult to determine the relevant market and the relevant industry necessary to
identify the structural competitiveness of any industry.
Answer:
A person who has auto insurance is likely to drive a little less safely and to take less
care in parking the car in a safe place off the street. This is an example of a problem
called:
A. signaling.
B. moral hazard.
C. externality.
D. adverse selection.
Answer:
An efficient policy to reduce pollution would reduce pollution to the point where:
A. the marginal costs of reducing pollution equal the marginal benefits of reducing
pollution.
B. it is eliminated.
C. the marginal costs of reducing pollution are greater than the marginal benefits of
reducing pollution.
D. the marginal costs of reducing pollution are less than the marginal benefits of
reducing pollution.
Answer:
Market economies are present in:
A. very few countries.
B. about half the countries of the world.
C. most economies.
D. all economies.
Answer:
As the price of samosas (a kind of food in India) was raised from 2 to 3 rupees (Indian
currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest
tenth, the elasticity of demand of samosas is:
A. 4.
B. 0.6.
C. 1.8.
D. impossible to determine because we don’t know the exchange rate of the rupee.
Answer:
Refer to the following graph.
If this graph represents the supply of and demand for an imported product, a tariff of t
will result in revenue for the government shown by area:
A. ACIJ.
B. BDGH.
C. BOEH.
D. DOEG.
Answer:
Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the
cookie industry is a constant-cost, perfectly competitive industry, this decline in market
demand will cause market supply to:
A. decrease in the long run, resulting in a lower equilibrium price.
B. decrease in the long run until the equilibrium price is again equal to minimum
average total cost.
C. increase in the long run, resulting in a higher equilibrium price.
D. increase in the long run until the equilibrium price is again equal to minimum
average total cost.
Answer:
Isoquants slope downward because:
A. average total costs decline.
B. as less of one input is used, more of another must be used if output is to remain
constant.
C. as less of one input is used, more of another must be used if costs are to remain
constant.
D. the marginal rate of substitution increases.
Answer:
Refer to the table shown. If the market price is $8, a perfectly competitive
profit-maximizing firm will produce:
A. 1 unit of output.
B. 2 units of output.
C. 3 units of output.
D. 4 units of output.
Answer:
Which of the following would most likely generate a positive externality?
A. roller coaster rides
B. pollution
C. alcoholic beverages
D. education
Answer:
Refer to the graph shown of average costs for a typical firm. The per-unit cost of the
industry would be $8 if:
A. two firms produced 250 units of output each.
B. one firm produced 500 units of output.
C. two firms produced 333 units of output each.
D. one firm produced 667 units of output.
Answer:
The appreciation of a currency will:
A. balance a trade surplus.
B. have no impact on a country’s comparative advantages.
C. worsen a country’s comparative advantages.
D. improve a country’s comparative advantages.
Answer:
Given the equations for demand and supply: Qd = 48 – 4P and Qs = 4P – 16,
respectively, the market is in equilibrium when the quantity bought and sold is:
A. 8.
B. 16.
C. 24.
D. 32.
Answer:
Voluntary restraint agreements:
A. are prohibited by NAFTA.
B. do not affect imports in both the short run and the long run.
C. hurt consumers in both the short run and the long run.
D. hurt workers in both the short run and the long run.
Answer:
Harvard University once paid two financial managers, who helped manage Harvard’s
$20 billion endowment, each about $25 million. Harvard defended their pay “as normal
in the community of hedge-fund managers with which Harvard Management competes
for talent.” An economist probably would say that these pay levels:
A. make sense if their marginal factor costs exceed $25 million.
B. make sense if the value of their marginal product exceeds $25 million.
C. makes sense if their efficiency value calculates out to that level.
D. does not make sense because Harvard has the option of simply putting its funds into
a random selection of assets that would do as well.
Answer:
Brooke and Sandy both attend the same college and have the same expenses for tuition,
books, and supplies. However, Brooke is a famous actress who could earn $2 million
per year if she were not attending college whereas Sandy could earn $10,000 a year
serving hamburgers if he were not attending college. It follows that the opportunity cost
of attending college:
A. is the same for both Brooke and Sandy.
B. is greater for Brooke than for Sandy.
C. is greater for Sandy than for Brooke.
D. for Brooke and Sandy cannot be compared.
Answer:
Refer to the table shown. If the market price is $4, a perfectly competitive
profit-maximizing firm will produce:
A. 1 unit of output.
B. 2 units of output.
C. 3 units of output.
D. 4 units of output.
Answer:
Crackerjacks cost twice as much as Doritos. Fred maximizes utility by buying eight
boxes of Crackerjacks and some number of bags of Doritos. If the last box of
Crackerjacks gives Fred 100 units of utility, you can conclude that:
A. Fred has also bought 16 bags of Doritos.
B. the marginal utility of the last bag of Doritos Fred bought is 50 units.
C. the total utility of the bags of Doritos Fred bought is 200 units.
D. Fred has also bought four bags of Doritos.
Answer:
An assumption of a competitive market is that both buyers and sellers are price takers.
When we go to the mall to shop for clothing or to the grocery to buy food, what do we
usually observe?
A. Both buyers and sellers are usually price takers.
B. Buyers are often price takers, but sellers are usually price makers.
C. Buyers are often price makers, but sellers are usually price takers.
D. Both buyers and sellers are usually price makers.
Answer:
Consider the following information, which provides percentage change in GDP per
year:
Given this information, which of the following statements is true?
A. GDP in 2010 is less than in 2009.
B. GDP in 2010 is greater than in 2009.
C. GDP in 2013 is less than in 2012.
D. GDP in 2012 is greater than in 2011.
Answer:
The difference between economic profit and accounting profit is equal to:
A. zero.
B. implicit and explicit costs.
C. implicit and explicit revenues.
D. implicit revenues minus implicit costs.
Answer:
Global corporations in general are:
A. more difficult to regulate than domestic corporations.
B. as difficult to regulate as domestic corporations.
C. less difficult to regulate than domestic corporations.
D. beyond the scope of government regulation at any level.
Answer:
Countries can expect to gain from international trade as long as they:
A. keep production diversified.
B. specialize according to their comparative advantage.
C. produce only those goods for which they have a relatively high opportunity cost.
D. use trade restrictions to reduce competition for domestic producers.
Answer:
Assuming the standard assumptions, in an infinitely long repeated-play ultimatum
game, the second player’s best strategy is most likely to:
A. reject offers that appear unfair.
B. accept any offer.
C. accept only those offers over 50 percent of the total.
D. reject all offers.
Answer:
A firm can use 5 workers and 10 machines, 7 workers and 9 machines, or 8 workers and
9 machines to produce four cars. If each worker costs $200 and each machine is rented
for $50, the economically efficient input combination is:
A. 5 workers and 10 machines.
B. 7 workers and 9 machines.
C. 8 workers and 9 machines.
D. none of these input combinations.
Answer:
Assume the portable color TV industry is a perfectly competitive industry that uses a
specialized input. If this industry experiences an increase in demand, we might expect
that in the long run:
A. both input and output prices will increase.
B. only input prices will increase.
C. only output prices will increase.
D. neither input nor output prices will increase.
Answer:
The theory of rational choice assumes that:
A. tastes do not matter.
B. tastes are given.
C. tastes influence the supply curve.
D. tastes do not affect the demand curve.
Answer:
The following matrix represents a payoff matrix for a:
A. zero sum game.
B. non-zero sum game.
C. repeated game.
D. sequential game.
Answer:
Refer to the graphs shown. The market is computers. Which graph best represents the
impact of cheaper memory chips on the computer market?
A. a
B. b
C. c
D. d
Answer:
The following graph shows average fixed costs, average variable costs, average total
costs, and marginal costs of production.
Refer to the graph shown. The average variable cost curve is represented by which
curve?
A. I
B. II
C. III
D. IV
Answer:
Refer to the graph shown of a monopolistically competitive firm. In the long run:
A. marginal cost will fall for firms that remain as other firms exit the industry.
B. average total cost will rise for firms that remain as other firms enter the industry.
C. demand will fall for firms that remain as other firms enter the industry.
D. demand will rise for firms that remain as other firms exit the industry.
Answer: